Posted by AGORACOM
at 2:07 PM on Tuesday, January 28th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here For More Info
Excerpts from Crescat Capital November Newsletter:
Precious Metals
Precious metals are poised to benefit from what we consider to be the
best macro set up we’ve seen in our careers. The stars are all
aligning. We believe strongly that this time monetary policy will come
at a cost. Look in the chart below at how the new wave of global money
printing just initiated by the Fed in response to the Treasury market
funding crisis is highly likely to pull depressed gold prices up with
it.
The imbalance between historically depressed commodity prices
relative to record overvalued US stocks remains at the core of our macro
views. On the long side, we believe strongly commodities offer
tremendous upside potential on many fronts. Precious metals remain our
favorite. We view gold as the ultimate haven asset to likely outperform
in an environment of either a downturn in the business cycle, rising
global currency wars, implosion of fiat currencies backed by record
indebted government, or even a full-blown inflationary set up. These
scenarios are all possible. Our base case is that governments and
central banks will keep their pedals to the metal to attempt to fend off
credit implosion or to mop up after one has already occurred until
inflation becomes a persistent problem.
The gold and silver mining industry is precisely where we see one of
the greatest ways to express this investment thesis. These stocks have
been in a severe bear market from 2011 to 2015 and have been formed a
strong base over the last four years. They are offer and incredibly
attractive deep-value opportunity and appear to be just starting to
break out this year. We have done a deep dive in this sector and met
with over 40 different management teams this year. Combining that work
with our proprietary equity models, we are finding some of the greatest
free-cash-flow growth and value opportunities in the market today
unrivaled by any other industry. We have also found undervalued
high-quality exploration assets that will make excellent buyout
candidates.
We recently point out this 12-year breakout in mining stocks relative
to gold now looks as solid as a rock. In our view, this is just the
beginning of a major bull market for this entire industry. We encourage
investors to consider our new Crescat Precious Metals SMA strategy which
is performing extremely well this year.
Zero Discounting for Inflation Risk Today
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, if the global financial markets
cannot absorb the increase in Treasury debt, the Fed will be forced to
monetize it even more. The problem is that the Fed’s panic money
printing at this point in the economic cycle may hasten the unwinding of
the imbalances it is so desperate to maintain because it has perversely
fed the last-gasp melt up of speculation in already record over-valued
and extended equity and corporate credit markets. It is reminiscent of
when the Fed injected emergency cash into the repo market at the peak of
the tech bubble at the end of 1999 to fend off a potential Y2K computer
glitch that led to that market and business cycle top. After 40
years of declining inflation expectations in the US, there is a major
disconnect today between portfolio positioning, valuation, and economic
reality. Too much of the investment world is long the “risk parityâ€
trade to one degree or another, long stocks paired with leveraged long
bonds, a strategy that has back-tested great over the last 40 years, but
one that would be a disaster in a secular rising inflation environment.
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, rising long-term inflation, and
the hidden tax thereon, is the default, bi-partisan plan for the US
government’s future funding regardless of who is in the White House and
Congress after the 2020 elections. The market could start discounting
this sooner rather than later. The Fed’s excessive money printing
may only reinforce the unraveling of financial asset imbalances today as
it leads to rising inflation expectations and thereby a sell-off in
today’s highly over-valued long duration assets including Treasury bonds
and US equities, particularly insanely overvalued growth stocks. We
believe we are in the vicinity of a major US stock market and business
cycle peak.
Posted by AGORACOM
at 2:04 PM on Wednesday, January 22nd, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here for More Info
Speaking to CNBC’s Squawk Box on the sideline of the World Economic
Forum in Davos, Switzerland, Ray Dalio, founder of Bridgewater
Associates, said that in the current environment, investors should hold a
global diversified portfolio that includes some gold.
“Cash is trash,†he declared in the interview. He warned that investors should get out of cash as central banks continue to print money.
However, Dalio tempered his comments on the precious metal, saying that “a bit of gold is a diversifier.â€
But it is not only cash that Dalio railed against. He also didn’t
have anything nice to say about bitcoin, which is neither a medium of
exchange nor a store of value.
He said that investors shouldn’t go anywhere near bitcoin because of
its volatility. When it comes to a store of value, central banks will
continue to prefer to hold hard assets.
“What are [central banks] going to hold as reserves? What has been
tried and true? They are going to hold gold. That is a reserve
currency, and it has been a reserve currency for a thousand years,†he
said.
Although Dalio said that he sees a low chance of a recession in
2020, he warned investors to look further out. The risks are that
because of where monetary policy is right now, it will be less
effective when the downturn does come.
“At a point in the future, we still are going to think about what’s a
storeholder of wealth. Because when you get negative-yielding bonds or
something, we are approaching a limit that will be a paradigm shift,â€
he said.
Dalio has been fairly bullish on gold and for nearly three years has
advocated that investors hold at least 5% to 10% of their portfolio in
gold.
Dalio’s latest comments come less than a week after Greg Jensen,
co-chief investment officer at Bridgewater Associates, said in an
interview with the Financial Times that he sees gold pushing to $2,000
an ounce.
Jensen said that he sees higher gold prices through 2020 as
inflation picks up but central banks, in particular the Federal Reserve,
step away from the fight.
“The Fed won’t be pre-emptive,†he said.
Jensen said that he is also bullish on gold as geopolitical uncertainty dominates financial markets and investor sentiment.
“When you look at the geopolitical strife, how many foreign entities
really want to hold dollars? And what are they going to hold? Gold
stands out,†he said.
Posted by AGORACOM
at 8:23 AM on Monday, January 20th, 2020
Cardston, Alberta–(Newsfile Corp. – January 20, 2020) – American Creek Resources Ltd.
(TSXV: AMK) (the “Company” or “American Creek”) is pleased to announce
that it has entered into a property purchase agreement pursuant to which
it will acquire the precious and base mineral undersurface rights
relating to 45 Crown Grant claims commonly referred to as the “Glacier
Creek Claims” located in the Stewart area, British Columbia, from a
subsidiary of Strikepoint Gold Inc. (TSXV:SKP)(“Strikepoint“). In
consideration for the Glacier Creek Claims, the Company will pay
Strikepoint $50,000, issue 3,000,000 common shares to Strikepoint, and
grant Strikepoint a 0.5% NSR royalty over the Glacier Creek Claims which
NSR royalty may be purchased by the Company at any time for $500,000
cash.
The Glacier Creek Crown Grant claim package consists of claims that overlap a portion of the Company’s
present Dunwell property as well as extending beyond the current
Dunwell property boundaries. The net effect being a significant
expansion of the Dunwell project and associated mineral rights.
Darren
Blaney, President & CEO of the Company stated: “We are very pleased
to be able to acquire this package of Crown Grants as it makes sense to
amalgamate the claims into one property. This acquisition expands our
Dunwell property considerably and provides for increased exploration
potential as work is done in the immediate area hosting the historic
Dunwell Mine as well as in the surrounding region. We believe that the
Dunwell Mine and the multiple bonanza grade gold and silver showings
within several kilometers of the mine are all related geologically and
are part of a large underlying system”.
Completion of this
acquisition is conditional upon, among other things, receipt of all
necessary regulatory approvals, including approval of the TSX Venture
Exchange.
Any shares issued pursuant to this transaction will be subject to a 4 month hold period pursuant to applicable securities laws.
About American Creek
American
Creek is a Canadian junior mineral exploration company with a strong
portfolio of gold and silver properties in British Columbia.
Three
of those properties are located in the prolific “Golden Triangle”; the
Treaty Creek and Electrum joint venture projects with Tudor Gold/Walter
Storm as well as the 100% owned past producing Dunwell Mine.
A
major drill program was conducted in 2019 at Treaty Creek by JV partner
and operator Tudor Gold. The focus of the program was on the Goldstorm
zone where drilling has produced very wide intercepts of gold including a
780 meter intercept of 0.683 g/t gold including a higher grade upper portion of 1.095 g/t over 370.5 meters.
The
Treaty Creek Project is a Joint Venture with Tudor Gold owning 60% and
acting as operator. American Creek and Teuton Resources each have 20%
interests in the project. American Creek and Teuton are both fully
carried until such time as a Production Notice is issued, at which time
they are required to contribute their respective 20% share of
development costs. Until such time, Tudor is required to fund all
exploration and development costs while both American Creek and Teuton
have “free rides”.
A drill program was also recently concluded on
the 100% owned Dunwell Mine property located near Stewart. Assay
results are pending.
The Corporation also holds the Gold Hill,
Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King
properties located in other prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Company is available on its website at www.americancreek.com
Posted by AGORACOM
at 2:44 PM on Saturday, January 18th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here for More Info
From the HRA Journal: Issue 314
The fun doesn’t stop. Waves of liquidity continue to wash traders
cares away. Even assassinations and war mongering generate little more
than half day dips on Wall St. It seems nothing can get in the way of
the bull rally that’s carrying all risk assets higher.
It feels like it could go on for a while, though I think the
liquidity will have to keep coming to sustain it. By most readings,
bullishness on Wall St is at levels that are rarely sustained for more
than a few weeks. Some sort of correction on Wall St seems highly
likely, and soon. Whether its substantial or just another blip on the
way higher remains to be seen.
The resource sector, especially gold and silver stocks, have had
their own rally. Our Santa Claus market was as good or better than Wall
St’s for a change. And I don’t think its over yet. I think we’re in for
the best Q1 we’ve seen for a few years. And we could be in for something
better than that even. I increasingly see signs of a major rally
developing in the gold space. It’s already been pretty good but I think a
multi-quarter, or longer, move may be starting to take shape.
I usually spend time on all the metals in the first issue of the
year. But, because the makings of this gold rally are complex and long
in coming I decided to detail my reasoning. That ended up taking several
pages so I’ll save talk on base metals and other markets for the next
issue.
No, I’m not writing about Louis IV, though there might be some
appropriateness to the analogy, now that I think about it. The quote is
famous, even though there’s no agreement on what it was supposed to
mean. Most figure Louis was referring to the biblical flood, that all
would be chaos once his reign ended.
The deluge I’m referring to isn’t water. It’s the flood of money the
US Fed, and other central banks, continue to unleash to keep markets
stable. Markets, especially stock markets, love liquidity. You can see
the impact of the latest deluge, particularly the US Fed’s in the chart
below that traces both the SPX index value and the level of a “Global
Liquidity Proxy†(“GLPâ€) measuring fiscal/monetary tightness and
weakness.
You can see the GLP moved lower in late 2018 as the Fed tightened and
the impact that had on Wall St. Conversely, you can see the SPX running
higher in the past couple of months as the US backed off rate
increases, increased fiscal deficit expansion, and grew the Fed balance
sheet through, mainly, repo market operations.
Wall St, and most other bourses, are loving these money flows. The
Santa Claus rally discussed in the last issue continued to strengthen
all the way to and through year end. As it turned out, the Fed either
provided enough backstop in advance or the yearend repo issues were
overstated. The repo market itself was calm going through year end and a
lot of the short-term money offered by the Fed during that week wasn’t
taken down.
Everything may have changed in the past couple of days with the
dramatic increase in US-Iran tensions. I don’t know how big an issue
that will be, since no one knows what form Iran’s retaliation will be or
how much things will escalate. I DO think it’s potentially a big deal
with very negative connotations, but it may take time to unfold. Someone
at the Fed thought so too, as the past couple of days saw a return to
large scale Fed lending in the repo market.
I’ve no doubt Iran will try and take revenge for the assassination of
its most famous military commander by the US. But I don’t know what
form it will take and if this means the US has drawn itself into the
Mideast quagmire even more. I fear it has though. The US is already
talking about adding 3,000 troops to its Mideast presence and they’re
just warming up. Even larger scale attacks, if they happen, may not
derail Wall St, but they’re certainly not a positive development at any
level.
We know how stretched both market valuations and sentiment were
before the Suleimani drone strike. The chart below shows a three-year
trace of the “fear/greed indexâ€. You can see that its hardly a stable
reading. It flip flops often and extreme readings rarely hold for long.
At last check, the reading was 94% bullish.
Sentiment almost never gets that bullish and, when it does, nothing
good comes of it for bulls. A reading that close to 100% tells you we’re
just about out of buyers. Whatever happens in and around Iran, I think a
near term correction is inevitable. The only question is whether it’s a
large one or not.
A rapid escalation in US-Iran tensions could certainly make a near
term correction larger. If the flood of liquidity continues though, a
correction could just be another waystation on the road to higher highs.
There are a couple of other dangers Wall St still faces that I’ll touch
on briefly at the end of this article. First however, lets move on to
the main event for us-the gold market.
It wasn’t just the SPX enjoying a Santa rally this year. Gold
experienced the rally we were hoping for that gold miner stocks seemed
to be foretelling early last month. Gold’s been doing well since it
bottomed at $1275 in June, but it didn’t feel that way during the long
hiatus between the early September high and the current move. The gold
price currently sits above September’s multi-year high, after breaching
that high in the wake of the Baghdad drone strike. And the first
retaliatory strike by Iran. Volatility will be very high for a while
going forward.
I think we’ll see more multi-year highs going forward. I hate that
the latest move higher is driven by geopolitics. Scary geopolitics and
military confrontations mean people are dying. We don’t want to profit
from misery. And we won’t anyway, if things get ugly enough in the
Mideast to scare traders out of the market.
Geopolitical price moves almost always unwind quickly. I’d much
prefer to see gold moving higher for macro reasons, not as a political
safety trade. I expect more political/military inspired moves. As the
Iran conflict unfolds. Make no mistake, Iran is NOT Iraq. Its army is
far larger, better trained and better equipped than Iraq. This could get
ugly.
The balance of this piece will deal with my macro argument for higher
gold prices over an extended period. The geopolitical stuff will be
layered on top of that for the next while and could strengthen both gold
prices and the $US in risk-off trading. It should be viewed as a
separate event from the argument laid out below.
What else is driving gold higher? In part, it was gold’s inverse
relationship with the US Dollar. As you already know, I’m not a believer
that “its all about the USD, all the time†when it comes to the gold
market. That’s an over-simplification of a more complex relationship. It
also discounts the idea of gold as its own asset class that trades for
its own reasons.
If you look at the gold chart above, and the USD chart below it, its
immediately apparent that there isn’t a constant negative correlation at
play. Gold rallied during the summer at the same time the USD did and
for the same reason; the world-wide explosion of negative real yields.
Gold weakened a bit when yields reversed to the upside and the USD got a
bit of traction, but things changed again at the start of December.
The USD turned lower and lost two percent during December. US bond
yields were generally rising during the month and the market (right or
wrong) was assuming economic growth was accelerating. So, neither of
those items explains the USD weakness.
If gold was a “risk off†trade, you sure couldn’t see it in the way
any other market was trading. So, is there another explanation for
recent strength in the gold price, and what does it tell us about 2020
and, perhaps, beyond?
Well, I’ve got a theory. If I’m right, it could mean a bull run for gold has a long way to go.
Some of this theory will be no surprise to you because it does
partially hinge on further USD weakness. There are long term structural
reasons why the US currency should weaken. But there are also
fluctuating sources of demand for USDs, particularly from offshore
buyers and borrowers that transact in US currency. That can create
enough demand to strengthen the US over long periods. We just went
though one such period, but it looks like that may have come to an end,
with more bearish forces to the USD reasserting themselves.
How did we get here? Let’s start with the big picture, displayed on
the top chart on the next page. It gives a long-term view of US Federal
deficits and the unemployment rate. Normally, these travel in tandem.
Higher unemployment means more social spending and higher deficits.
Government spending expands during recessions and contracts-or should-
(as a percentage of GDP) during expansions. Classic Keynesian stuff.
You rarely see these two measures diverge. The two times they did
significantly before, on the left side of the chart, was due to “wartime
deficits†which acted (along with conscription) to stimulate the
economy and drive down unemployment.
You can see the Korean and Vietnam war periods pointed out on the chart.
The current period stands out for the extreme size of the divergence.
US unemployment rates are at multi decade lows and yet the fiscal
deficit as a percentage of GDP keeps rising. There has never been a
divergence this large and its due to get larger.
We know why this is. Big tax cuts combined with a budget that is
mostly non-discretionary. And the US is 10 years into an economic
expansion, however weak. Just think what this graph will look like the
next time the US goes into recession.
We can assume US government deficits aren’t going to shrink any time
soon (and I think we can, pun intended, take that to the bank). That
leaves trade in goods to act as a counterbalance to the funding demand
created by fiscal deficits.
The chart above makes it clear the US won’t get much help from
international trade. The US trade balance has been getting increasingly
negative for decades. It’s better recently, but unlikely to turn
positive soon, and maybe not ever.
To be clear, this is not a bad thing in itself, notwithstanding the
view from the White House. The relative strength of the US economy and
the US Dollar and cheaper offshore production costs have driven the
trade balance. It’s grown because Americans found they got more value
buying abroad and the world was happy to help finance it. It’s not a bad
thing, but not a US Dollar support either.
The more complete picture of currency/investment flows is given by
changes in the Current Account. In simplified terms, the Current Account
measures the difference between what a country produces and what it
consumes. For example, if a country’s trade deficit increases, so does
its current account deficit. If there are funds flowing in from overseas
investments on the other hand, this decrease the Current Account
deficit or increase the surplus.
The graph below summarizes quarterly changes in the US current
account. You can see how the balance got increasingly negative in the
mid 2000’s as both imports and foreign investment by US companies
increased.
Not coincidentally, this same period leading up to the Financial
Crisis included a sustained downtrend in the US Dollar Index. The USD
index chart on the bottom of the next page shows the scale of that
decline, from an index value of 120 at the start of 2002 all the way
down to 73 in early 2008.
The current account deficit (and value of the USD) improved markedly
up to the end of the Financial Crisis as money poured into the US as a
safe haven and consumers cut back on imports. The current account
deficit bas been relatively stable since then, running at about
$100bn/quarter until it dipped a bit again last year.
Trade, funds flows and changes in money supply have the largest
long-term impacts on currency values. When the US Fed ended QE and
started tightening monetary conditions in 2014, the USD enjoyed a strong
rally. The USD Index was back to 100 by early 2015 and stayed there
until loosening monetary conditions-and lots of jawboning from
Washington-led to pullback. Things reversed again and the USD maintained
a mild uptrend from early 2018 until now.
There are still plenty of US Dollar bulls around, and their arguments
have short-term merit. Yes, the US has higher real interest rates and
somewhat higher growth. Both are important to relative currency
valuations as I’ve said in the past. Longer term however, the “twin
deficits†-fiscal and current account-should underpin the fundamental
value of the currency.
Movements don’t happen overnight, especially when you’re talking
about the worlds reserve currency that has the deepest and largest
market supporting it. Changing the overall trend for the USD is like
turning a supertanker. I think it’s happening though, and it has big
potential implications for commodities, especially gold.
Dollar bulls will tell you the USD is the “cleanest shirt in the
laundry hamperâ€, referring to the relative strength of the growth rate
and interest rates compared to other major currencies. That’s true if we
just look at those measures but definitely not true when we look at the
longer term-fiscal and current account deficits.
In fact, the US has about the worst combined fiscal/current account deficit in the G7. The chart at the bottom of this page, from lynalden.com
shows the 2018 values for Current Account and Trade balances for a
number of major economies, as a percentage of their GDP. It’s not a
handsome group.
Both the trade and current account deficits are negative for most of
them. In terms of G7 economies, the US has the worst combined
Current/Trade deficit at 6% of GDP annually. You may be surprised to
note that the Current/Trade balance for the Euro zone is much better
than the US, thanks to a large Trade surplus. Much of that is generated
by Germany. Indeed, this chart explains Germanys defense of the Euro.
It’s combined Trade/Current Account surplus is so large it’s currency
would be skyrocketing if it still used the Deutschmark.
Because the current account deficit is cumulative, the overall
international investment position of the US has continued to worsen. The
US has gone from being an international creditor to an international
debtor, and the scale if its debt keeps increasing. That means it’s
getting harder every year to reverse the current account position as the
US borrows ever more abroad to cover its trade and fiscal deficits.
Interest outflows keep growing and investment inflows shrinking.
Something has to give.
The US has to borrow overseas, as private domestic demand for
Treasury bonds isn’t high enough to fund the twin deficits. In the past,
whenever the US Dollar got too high, offshore demand for US government
debt diminished. It’s not clear why. Maybe the higher dollar made
raising enough foreign funds difficult, or perhaps buyers started
worrying about the USD dropping after they bought when it got too
expensive. Whatever the reason, foreign holdings of US Treasuries have
been declining, forcing the US to find new, domestic, buyers.
Last year, the US Fed stopped its quantitative tightening program,
due to concerns about Dollar liquidity. Then came the repo market. Since
September, the Fed’s balance sheet has expanded by over $400 billion,
mainly due to repo market transactions.
The Fed maintains this “isn’t QE†because these are very short duration transactions but, cumulatively, the total Fed balance sheet keeps expanding. The “QE/no QE†debate is just semantics.
What do these transactions look like? Mostly, its Primary Dealers,
banks that also take part in Treasury auctions, in the repo market. The
Fed buys bonds, usually Treasuries, from these banks and pays for them
in newly printed Dollars. That injects money into the system, helps hold
down interest rates in the repo market and, not coincidentally,
effectively helps fund the US fiscal deficit. To put the series of
transactions in their simplest form, the US is effectively monetizing its deficit with a lot of these transactions.
The chart below illustrates the problem for the Primary Dealer US
banks. They’ve got to buy Treasuries when they’re auctioned-that is
their commitment as Primary Dealers. They also need to hold minimum cash
balances as a percentage of assets under Basel II bank regulations.
Cash balances fell to the minimum mandated level by late 2019- the
horizontal black line on the chart. That’s when the trouble started.
These banks are so stuffed with Treasuries that they didn’t have
excess cash reserves to lend into the repo market. Hence the blow up
back in September and the need for the Fed to inject cash by buying
Treasuries. The point, however, is that this isn’t really a “repo market
issueâ€, that’s just where it reared its head. It’s a “too many
Treasuries and not enough buyers†problem.
It will be tough for the Treasury to attract more offshore buyers
unless the USD weakens, or interest rates rise enough to make them
irresistible. Or a big drop in the federal deficit reduces the supply of
Treasuries itself.
I doubt we’ll see interest rates move up significantly. I don’t think
the economy could handle it and it would be self-defeating anyway, as
the government deficit would explode because of interest expenses. And
that’s not even taking into account the fact that President Trump would
be freaking out daily.
Based on recent history and political expediency, I’d say the odds of
significant budget deficit reductions are slim and none. That’s
especially true going into an election year. There’s just no way we’re
going to see spending restraint or tax increases in the next couple of
years. Indeed, the supply of Treasuries will keep growing even if the US
economy grows too. If there is any sort of significant slowdown or
recession the Federal deficit will explode and so will the new supply of
Treasures. Not an easy fix.
Barring new haven demand for US Treasuries, odds are the Fed will
have to keep sopping up excess supply. That means expanding its balance
sheet and, in so doing, effectively increasing the US money supply.
That brings us (finally!) to the “money shot†chart that appears
above. It compares changes in the size of the Fed balance sheet and the
US Dollar Index. To make it readable and allow me to match the scales, I
generated a chart that tracks annual percentage changes.
The chart shows a strong inverse correlation between changes in the
size of the Fed balance sheet and the value of the USD. This is
unsurprising as most transactions that expand the Fed balance sheet also
expand the money supply.
It’s impossible to tell how long the repo market transactions will
continue but, after three months, they aren’t feeling very “temporaryâ€.
To me, it increasingly looks like these market operations are “debt
monetization in dragâ€.
I don’t know if that’s the Fed’s real intent or just a side effect.
It doesn’t really matter if the funding and money printing continues at
scale. Even if the repo market calms completely, the odds are good we
see some sort of “new QE†start up. Whatever official reason is given
for it; I think it will happen mainly to soak up the excess supply of
Treasuries fiscal deficits are creating.
I don’t blame the FOMC if they’re being disingenuous about it. That’s
their job after all. If you’re a central banker, the LAST thing you’re
going to say is “our government is having trouble finding buyers for its
debtâ€, especially if its true.
With no prospect of lower deficits and apparent continued reduction
in offshore Treasury holdings, this could develop into long-term
sustained trend. I don’t expect it to move in a straight line, markets
never do. A severe escalation in Mideast tensions or the start of a
serious recession could both generate safe-haven Treasury buying. Money
flows from that would take the pressure off the Fed and would be US
Dollar supportive too.
That said, it seems the US has reached the point where a substantial
increase in its central bank’s balance sheet is inevitable. Both Japan
and the Eurozone have gotten there before the Fed, but it looks like it
won’t be immune.
The Eurozone at least has a “Twin surplus†to help cushion things.
And Japan, considered a basket case economically, had an extremely deep
pool of domestic savings (far deeper than the US) to draw on. Until very
recently, Japan also ran massive Current Account surpluses thanks to
decades of heavy investments overseas by Japanese entities. Those
advantages allowed the ECB and especially the BoJ to massively expand
their balance sheets without generating a huge run up in interest rates
or currency collapse.
I don’t know how far the US Fed can expand its balance sheet before
bond yields start getting away from it. I think pretty far though.
Having the world’s reserve currency is a massive advantage. There is
huge built in demand for US Dollars and US denominated debt. That gives
the Fed some runway if it must keep buying US Treasuries.
Assuming a run on yields doesn’t spoil the party, continued balance
sheet and money supply expansion should put increasing downward pressure
on the US Dollar. I don’t know if we’ll see a move as large as the
mid-2000s but a move down to the low 80s for the USD Index over the
course of two or three years wouldn’t be surprising.
It won’t be a straight-line move. A recession could derail things,
though the bear market on Wall St that would generate would support
bullion. Currency markets tend to be self-correcting over extended
periods. If the USD Index falls enough and there is a bump in US real
interest rates offshore demand for Treasuries should increase again.
The bottom line is that this is, and will continue to be, a very
dynamic system. Even so, I think we’ve reached a major inflection point
for the US currency. The 2000s were pretty good for the gold market and
gold stocks. We started from a much lower base of $300/oz on the gold
price. Starting at a $1200-1300 base this time, I think a price above
$2000/oz is a real possibility over the next year or two.
It’s not hard to extrapolate prices higher than that, but I’m not
looking or hoping for those. I prefer to see a longer, steadier move
that brings traders along rather than freaking them out.
This prediction isn’t a sure thing. Predictions never are. But I
think the probabilities now favor an extended bull run in the gold
price. Assuming stock markets don’t blow up (though I still expect that
correction), gold stocks should put in a leveraged performance much more
impressive than the bullion price itself.
There will be consolidations and corrections along the way, but I
think there will be many gold explorers and developers that rack up
share price gains in the hundreds of percent. That doesn’t mean buying
blindly and never trading. We still need to adjust when a stock gets
overweight and manage risk around major exploration campaigns. The last
few weeks has been a lot more fun in the resource space. I don’t think
the fun’s over yet. Enjoy the ride.
Like any good contrarian, a 10-year bull market makes me alert of
signs of potential trouble. As noted at the start of this editorial, I’m
expecting continues floods of liquidity. That may simply overwhelm
everything else for a while and allow Wall St to keep rallying, come
what may.
That said, a couple of data points recently got my attention. One is
more of a sentiment indicator, seen in the chart below. More than one
wag has joked that the Fed need only worry about Wall St, since the
stock market is the economy now. Turns out there is more than a bit of
truth to that.
The chart shows the US Leading Indicator reading with the level of
the stock market (which is a component of the official Leading
Indicator) removed. As you can see, without Wall St, the indicator
implies zero growth going forward. I’m mainly showing it as evidence of
just how surreal things have become.
The chart above is something to keep an eye on going forward. It
shows weekly State unemployment claims for several major sectors of the
economy. What’s interesting about this chart is that claims have been
climbing rapidly over the past few weeks. Doubly interesting is that the
increase in claims is broad, both within and across several sectors of
the economy.
I take the monthly Non-Farm Payroll number less seriously than most,
because it’s a backward-looking indicator. This move in unemployment
claims looks increasingly like a trend though. It’s now at its highest
level since the Financial Crisis.
It’s not in the danger zone-yet. But its climbing fast. We may need
to start paying more attention to those payroll numbers. If the chart
below isn’t a statistical fluke, we may start seeing negative surprises
in the NFP soon. That won’t hurt the gold price either.
Source and Thanks: https://www.hraadvisory.com/golds-big-picture
Posted by AGORACOM
at 9:37 AM on Friday, January 17th, 2020
Cardston, Alberta–(January 17, 2020) – American Creek Resources Ltd.
(TSXV: AMK) (OTC Pink: ACKRF) (“American Creek”) (“the Corporation”)
would like to cordially invite you to visit us at Booth #435 at the Vancouver Resource Investment Conference
(VRIC) to be held at the Vancouver Convention Centre West (1055 Canada
Place, Vancouver) on Sunday January 19th – Monday January 20th, 2020.
The Vancouver Resource Investment Conference has been the bellwether
of the junior mining market for the last twenty-five years. It is the
number one source of information for investment trends and ideas,
covering all aspects of the natural resource industry. Each year, the
VRIC hosts over 60 keynote speakers, 350 exhibiting companies and 9000
investors.
Roundup held in Convention Center with sails and VRIC held in Convention Center with grass.
We also invite you to visit us on Wednesday January 22nd and Thursday January 23rd at Booth #1024, in the Core Shack at the Association for Mineral Exploration (AME) Roundup’s 37th annual conference held at the Vancouver Convention Centre East, under the sails of Canada Place.
With this year’s theme “Lens on Discovery” American Creek was
selected to display core from the past producing high-grade Dunwell
Mine. A maiden drill program was started in late 2019 with assays
pending. The company will also be discussing advancements on its JV
Treaty Creek project along with the Gold Hill project located in SE
British Columbia.
AME is the lead association for the mineral exploration and
development industry based in British Columbia. Established in 1912, AME
represents, advocates, protects and promotes the interests of thousands
of members who are engaged in mineral exploration and development in
B.C. and throughout the world.
AME’s annual Mineral Exploration Roundup conference brings together
more than 6,500 people annually to share innovative ideas, generate new
connections and create collaborative solutions related to mineral
exploration and development. It is a space where mineral explorers,
industry professionals and leaders go to network and is a driving force
for mineral exploration in Western Canada and the North and South
American Cordillera.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 11:47 AM on Thursday, January 16th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here for More Info
About American Creek
American Creek is a Canadian mineral exploration company with a
strong portfolio of gold and silver properties in British Columbia.
Three of those properties are located in the prolific “Golden
Triangleâ€; the Treaty Creek and Electrum joint venture projects with
Tudor Gold/Walter Storm as well as the 100% owned past producing
Dunwell Mine.
The Corporation also holds the Gold Hill, Austruck-Bonanza,
Ample Goldmax, Silver Side, and Glitter King properties located in
other prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 7:40 PM on Monday, January 13th, 2020
SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits.
Excerpts from Crescat Capitals November Newsletter:
Precious Metals
Precious metals are poised to benefit from what we consider to be the
best macro set up we’ve seen in our careers. The stars are all
aligning. We believe strongly that this time monetary policy will come
at a cost. Look in the chart below at how the new wave of global money
printing just initiated by the Fed in response to the Treasury market
funding crisis is highly likely to pull depressed gold prices up with
it.
The imbalance between historically depressed commodity prices
relative to record overvalued US stocks remains at the core of our macro
views. On the long side, we believe strongly commodities offer
tremendous upside potential on many fronts. Precious metals remain our
favorite. We view gold as the ultimate haven asset to likely outperform
in an environment of either a downturn in the business cycle, rising
global currency wars, implosion of fiat currencies backed by record
indebted government, or even a full-blown inflationary set up. These
scenarios are all possible. Our base case is that governments and
central banks will keep their pedals to the metal to attempt to fend off
credit implosion or to mop up after one has already occurred until
inflation becomes a persistent problem.
The gold and silver mining industry is precisely where we see one of
the greatest ways to express this investment thesis. These stocks have
been in a severe bear market from 2011 to 2015 and have been formed a
strong base over the last four years. They are offer and incredibly
attractive deep-value opportunity and appear to be just starting to
break out this year. We have done a deep dive in this sector and met
with over 40 different management teams this year. Combining that work
with our proprietary equity models, we are finding some of the greatest
free-cash-flow growth and value opportunities in the market today
unrivaled by any other industry. We have also found undervalued
high-quality exploration assets that will make excellent buyout
candidates.
We recently point out this 12-year breakout in mining stocks relative
to gold now looks as solid as a rock. In our view, this is just the
beginning of a major bull market for this entire industry. We encourage
investors to consider our new Crescat Precious Metals SMA strategy which
is performing extremely well this year.
Zero Discounting for Inflation Risk Today
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, if the global financial markets
cannot absorb the increase in Treasury debt, the Fed will be forced to
monetize it even more. The problem is that the Fed’s panic money
printing at this point in the economic cycle may hasten the unwinding of
the imbalances it is so desperate to maintain because it has perversely
fed the last-gasp melt up of speculation in already record over-valued
and extended equity and corporate credit markets. It is reminiscent of
when the Fed injected emergency cash into the repo market at the peak of
the tech bubble at the end of 1999 to fend off a potential Y2K computer
glitch that led to that market and business cycle top. After 40
years of declining inflation expectations in the US, there is a major
disconnect today between portfolio positioning, valuation, and economic
reality. Too much of the investment world is long the “risk parityâ€
trade to one degree or another, long stocks paired with leveraged long
bonds, a strategy that has back-tested great over the last 40 years, but
one that would be a disaster in a secular rising inflation environment.
With historic Federal debt relative to GDP and large deficits into
the future as far as the eye can see, rising long-term inflation, and
the hidden tax thereon, is the default, bi-partisan plan for the US
government’s future funding regardless of who is in the White House and
Congress after the 2020 elections. The market could start discounting
this sooner rather than later. The Fed’s excessive money printing
may only reinforce the unraveling of financial asset imbalances today as
it leads to rising inflation expectations and thereby a sell-off in
today’s highly over-valued long duration assets including Treasury bonds
and US equities, particularly insanely overvalued growth stocks. We
believe we are in the vicinity of a major US stock market and business
cycle peak.
Posted by AGORACOM
at 2:20 PM on Friday, January 10th, 2020
This article is an overview of the economic conditions that will
drive the gold price in 2020 and beyond. The turn of the credit cycle,
the effect on government deficits and how they are to be financed are
addressed.
In the absence of foreign demand for new US Treasuries
and of a rise in the savings rate the US budget deficit can only be
financed by monetary inflation. This is bound to lead to higher bond
yields as the dollar’s falling purchasing power accelerates due to the
sheer quantity of new dollars entering circulation. The relationship
between rising bond yields and the gold price is also discussed.
It
may turn out that the recent extraordinary events on Comex, with the
expansion of open interest failing to suppress the gold price, are an
early recognition in some quarters of the US Government’s debt trap.
The strains leading to a crisis for fiat currencies are emerging into plain sight.
Introduction
In 2019, priced in dollars gold rose 18.3% and silver by 15.1%. Or
rather, and this is the more relevant way of putting it, priced in gold
the dollar fell 15.5% and in silver 13%. This is because the story of
2019, as it will be in 2020, was of the re-emergence of fiat currency
debasement. Particularly in the last quarter, the Fed began aggressively
injecting new money into a surprisingly illiquid banking system through
repurchase agreements, whereby banks’ reserves at the Fed are credited
with cash loaned in return for T-bills and coupon-bearing Treasuries as
collateral. Furthermore, the ECB restarted quantitative easing in
November, and the Bank of Japan stands ready to ease policy further “if
the momentum towards its 2% inflation target comes under threat†(Kuroda
– 26 December).
The Bank of Japan is still buying bonds, but at
a pace which is expected to fall beneath redemptions of its existing
holdings. Therefore, we enter 2020 with money supply being expanded by
two, possibly all three of the major western central banks. Besides
liquidity problems, the central bankers’ nightmare is the threat that
the global economy will slide into recession, though no one will confess
it openly because it would be an admission of policy failure. And
policy makers are also terrified that if bankers get wind of a declining
economy, they will withdraw loan facilities from businesses and make
things much worse.
Of the latter concern central banks have good
cause. A combination of the turn of the credit cycle towards its
regular crisis phase and Trump’s tariff war has already hit
international trade badly, with exporting economies such as Germany
already in recession and important trade indicators, such as the Baltic
dry index collapsing. No doubt, President Trump’s most recent
announcement that a trade deal with China is ready for signing is driven
by an understanding in some quarters of the White House that over trade
policy, Trump is turning out to be the turkey who voted for Christmas.
But we have heard this story several times before: a forthcoming
agreement announced only to be scrapped or suspended at the last moment.
The
subject which will begin to dominate monetary policy in 2020 is who
will fund escalating government deficits. At the moment it is on few
investors’ radar, but it is bound to dawn on markets that a growing
budget deficit in America will be financed almost entirely by monetary
inflation, a funding policy equally adopted in other jurisdictions.
Furthermore, Christine Lagarde, the new ECB president, has stated her
desire for the ECB’s quantitative easing to be extended from government
financing to financing environmental projects as well.
2020 is
shaping up to be the year that all pretence of respect for money’s role
as a store of value is abandoned in favour of using it as a means of
government funding without raising taxes. 2020 will then be the year
when currencies begin to be visibly trashed in the hands of their
long-suffering users.
Gold in the context of distorted markets
At the core of current market distortions is a combination of
interest rate suppression and banking regulation. It is unnecessary to
belabour the point about interest rates, because minimal and even
negative rates have demonstrably failed to stimulate anything other than
asset prices into bubble territory. But there is a woeful lack of
appreciation about the general direction of monetary policy and where it
is headed.
The stated intention is the opposite of reality,
which is not to rescue the economy: while important, from a bureaucrat’s
point of view that is not the greatest priority. It is to ensure that
governments are never short of funds. Inflationary financing guarantees
the government will always be able to spend, and government-licenced
banks exist to ensure the government always has access to credit.
Unbeknown
to the public, the government licences the banks to conduct their
business in a way which for an unlicensed organisation is legally
fraudulent. The banks create credit or through their participation in QE
they facilitate the creation of base money out of thin air which is
added to their reserves. It transfers wealth from unsuspecting members
of the public to the government, crony capitalists, financial
speculators and consumers living beyond their means. The government
conspires with its macroeconomists to supress the evidence of rising
prices by manipulating the inflation statistics. So successful has this
scheme of deception been, that by fuelling GDP, monetary debasement is
presented as economic growth, with very few in financial mainstream
understanding the deceit.
The government monopoly of issuing
money, and through their regulators controlling the expansion of credit,
was bound to lead to progressively greater abuse of monetary trust. And
now, in this last credit cycle, the consumer who is also the producer
has had his income and savings so depleted by continuing monetary
debasement that he can no longer generate the taxes to balance his
government’s books later in the credit cycle.
The problem is not
new. America has not had a budget surplus since 2001. The last credit
cycle in the run up to the Lehman crisis did not deliver a budget
surplus, nor has the current cycle. Instead, following the Lehman crisis
we saw a marked acceleration of monetary inflation, and Figure 2 shows
how dollar fiat money has expanded above its long-term trend since then.
In recent years, the Fed’s attempt to return to monetary normality by
reducing its balance sheet has failed miserably. After a brief pause,
the fiat money quantity has begun to grow at a pace not seen since the
immediate aftermath of the Lehman crisis itself and is back in record
territory. Figure 1 is updated to 1 November, since when FMQ will have
increased even more.
In order to communicate effectively the
background for the relationship between gold and fiat currencies in 2020
it is necessary to put the situation as plainly as possible. We enter
the new decade with the highest levels of monetary ignorance imaginable.
It is a systemic issue of not realising the emperor has no clothes.
Consequently, markets have probably become more distorted than we have
ever seen in the recorded history of money and credit, as widespread
negative interest rates and negative-yielding bonds attest. In our
attempt to divine the future, it leaves us with two problems: assessing
when the tension between wishful thinking in financial markets and
market reality will crash the system, and the degree of chaos that will
ensue.
The timing is impossible to predict with certainty
because we cannot know the future. But, if the characteristics of past
credit cycles are a guide, it will be marked with a financial and
systemic crisis in one or more large banks. Liquidity strains suggest
that event is close, even within months and possibly weeks. If so, banks
will be bailed, of that we can be certain. It will require central
banks to create yet more money, additional to that required to finance
escalating government budget deficits. Monetary chaos promises to be
greater than anything seen heretofore, and it will engulf all western
welfare-dependent economies and those that trade with them.
We
have established that between keeping governments financed, bailing out
banks and perhaps investing in renewable green energy, the issuance of
new money in 2020 will in all probability be unprecedented, greater than
anything seen so far. It will lead to a feature of the crisis, which
may have already started, and that is an increase in borrowing costs
forced by markets onto central banks and their governments. The yield on
10-year US Treasuries is already on the rise, as shown in Figure 3.
Assuming no significant increase in the rate of savings and
despite all attempts to suppress the evidence, the acceleration in the
rate of monetary inflation will eventually lead to runaway increases in
the general level of prices measured in dollars. As Milton Friedman put
it, inflation [of prices] is always and everywhere a monetary
phenomenon.
Through QE, central banks believe they can contain
the cost of government funding by setting rates. What they do not seem
to realise is that while to a borrower interest is a cost to set against
income, to a lender it reflects time-preference, which is the
difference between current possession, in this case of cash dollars, and
possession at a future date. Unless and until the Fed realises and
addresses the time preference problem, the dollar will lose purchasing
power. Not only will it be sold in the foreign exchanges, but depositors
will move to minimise their balances and creditors their ownership of
debt.
If, as it appears in Figure 3, dollar bond yields are
beginning a rising trend, the inexorable pull of time preference is
already beginning to apply and further rises in bond yields will imperil
government financing. The Congressional Budget Office assumes the
average interest rate on debt held by the public will be 2.5% for the
next three years, and that net interest in fiscal 2020 will be $390bn,
being about 38% of the projected deficit of $1,008bn. Combining the
additional consequences for government finances of a recession with
higher bond yields than the CBO expects will be disastrous.
Clearly,
in these circumstances the Fed will do everything in its power to stop
markets setting the cost of government borrowing. But we have been here
before. The similarities between the situation for the dollar today and
the deterioration of British government finances in the early to
mid-1970s are remarkable. They resulted in multiple funding crises and
an eventual bail-out from the IMF. Except today there can be no IMF
bail-out for the US and the dollar, because the bailor gets its currency
from the bailee.
Nearly fifty years ago, in the UK gold rose
from under £15 per ounce in 1970 to £80 in December 1974. The peak of
the credit cycle was at the end of 1971, when the 10-year gilt yield to
maturity was 7%. By December 1974, the stock market had crashed, a
banking crisis had followed, price inflation was well into double
figures and the 10-year gilt yield to maturity had risen to over 16%.
History
rhymes, as they say. But for historians the parallels between the
outlook for the dollar and US Treasury funding costs at the beginning of
2020, and what transpired for the British economy following the Barbour
boom of 1970-71 are too close to ignore. It is the same background for
the relationship between gold and fiat currencies for 2020 and the few
years that follow.
Gold and rising interest rates
Received investment wisdom is that rising interest rates are bad for
the gold price, because gold has no yield. Yet experience repeatedly
contradicts it. Anyone who remembers investing in UK gilts at a 7% yield
in December 1971 only to see prices collapse to a yield of over 16%,
while gold rose from under £15 to £80 to the ounce over the three years
following should attest otherwise.
Part of the error is to
believe that gold has no yield. This is only true of gold held as cash
and for non-monetary usage. As money, it is loaned and borrowed, just
like any other form of money. Monetary gold has its own time preference,
as do government currencies. In the absence of state intervention, time
preferences for gold and government currencies are set by their
respective users, bearing in mind the characteristics special to each.
It is not a subject for simple arbitrage, selling gold and buying
government money to gain the interest differential, because the spread
reflects important differences which cannot be ignored. It is like
shorting Swiss francs and buying dollars in the belief there is no
currency risk.
The principal variable between the time
preferences of gold and a government currency is the difference between
an established form of money derived from the collective preferences of
its users, for which there is no issuer risk, and state-issued currency
which becomes an instrument of funding by means of its debasement.
The
time preference of gold will obviously vary depending on lending risk,
which is in addition to an originary rate, but it is considerably more
stable than the time preference of a fiat currency. Gold’s interest rate
stability is illustrated in Figure 4, which covers the period of the
gold standard from the Bank Charter Act of 1844 to before the First
World War, during which time the gold standard was properly implemented.
With the exception of uncontrolled bank credit, sterling operated as a
gold substitute.
Admittedly, due to problems created by the cycle of bank credit,
these year-end values conceal some significant fluctuations, such as at
the time of the Overend Gurney collapse in 1866 when borrowing rates
spiked to 10%. The depression following the Barings crisis of 1890
stalled credit demand which is evident from the chart. However,
wholesale borrowing rates, which were effectively the cost of borrowing
in gold, were otherwise remarkably stable, varying between 2-3½%. Some
of this variation can be ascribed to changing perceptions of general
borrower risk and some to changes in industrial investment demand,
related to the cycle of bank credit.
Compare this with dollar
interest rates since 1971, when the dollar had suspended the remaining
fig-leaf of gold backing, which is shown in Figure 5 for the decade
following.
In February 1972 the Fed Funds rate was 3.29%, rising eventually
to over 19% in January 1981. At the same time gold rose from $46 to a
high of $843 at the morning fix on 21 January 1980. Taking gold’s
originary interest rate as approximately 2% it required a 17% interest
rate penalty to dissuade people from hoarding gold and to hold onto
dollars instead.
In 1971, US Government debt stood at 35% of GDP
and in 1981 it stood at 31%. The US Government ran a budget surplus over
the decade sufficient to absorb the rising interest cost on its T-bill
obligations and any new Treasury funding. America enters 2020 with a
debt to GDP ratio of over 100%. Higher interest rates are therefore not a
policy option and the US Government, and the dollar, are ensnared in a
debt trap from which the dollar is unlikely to recover.
The seeds
of the dollar’s destruction were sown over fifty years ago, when the
London gold pool was formed, whereby central banks committed to help the
US maintain the price at $35, being forced to do so because the US
could no longer supress the gold price on its own. And with good reason:
Figure 6 shows how the last fifty years have eroded the purchasing
power of the four major currencies since the gold pool failed.
Over the last fifty years, the yen has lost over 92%, the
dollar 97.6%, the euro (and its earlier components 98.2% and sterling
the most at 98.7%. And now we are about to embark on the greatest
increase of global monetary inflation ever seen.
The market for physical gold
In recent years, demand for physical gold has been strong. Chinese
and Indian private sector buyers have to date respectively accumulated
an estimated 17,000 tonnes (based on deliveries from Shanghai Gold
Exchange vaults) and about 24,000 tonnes (according to WGC Director
Somasundaram PR quoted in India’s Financial Express last May).
It
is generally thought that higher prices for gold will deter future
demand from these sources, with the vast bulk of it being categorised as
simply jewellery. But this is a western view based on a belief in
objective values for government currencies and subjective prices for
gold. It ignores the fact that for Asians, it is gold that has the
objective value. In Asia gold jewellery is acquired as a store of value
to avoid the depreciation of government currency, hoarded as a central
component of a family’s long-term wealth accumulation.
Therefore,
there is no certainty higher prices will compromise Asian demand.
Indeed, demand has not been undermined in India with the price rising
from R300 to the ounce to over R100,000 today since the London gold pool
failed, and that’s despite all the government disincentives and even
bans from buying gold.
Additionally, since 2008 central banks
have accumulated over 4,400 tonnes to increase their official reserves
to 34,500 tonnes. The central banks most active in the gold market are
Asian, and increasingly the East and Central Europeans.
There
are two threads to this development. First there is a geopolitical
element, with Russia replacing reserve dollars for gold, and China
having deliberately moved to control global physical delivery markets.
And second, there is evidence of concern amongst the Europeans that the
dollar’s role as the reserve currency is either being compromised or no
longer fit for a changed world. Furthermore, the rising power of Asia’s
two hegemons continues to drive over two-thirds of the world’s
population away from the dollar towards gold.
Goldmoney estimates
there are roughly 180,000 tonnes of gold above ground, much of which
cannot be categorised as monetary: monetary not as defined for the
purposes of customs reporting, but in the wider sense to include all
bars, coins and pure gold jewellery accumulated for its long-term wealth
benefits through good and bad times. Annual mine production adds
3,000-3,500 tonnes, giving a stock to flow ratio of over 50 times. Put
another way, the annual increase in the gold quantity is similar to the
growth in the world’s population, imparting great stability as a medium
of exchange.
These qualities stand in contrast to the
increasingly certain acceleration of fiat currency debasement over the
next few years. Anyone prepared to stand back from the financial
coalface can easily see where the relationship between gold and fiat
currencies is going. Most of the world’s population is moving away from
the established fiat regime towards gold as a store of value, their own
fiat currencies lacking sufficient credibility to act as a dollar
alternative. And financial markets immersed in the fiat regime have very
little physical gold in possession. Instead, where it is now perceived
that there is a risk of missing out on a rise in the gold price,
investors have begun accumulating in greater quantities the paper
alternatives to physical gold: ETFs, futures, options, forward contracts
and mining shares.
Paper markets
From the US Government’s point of view, gold as a rival to the dollar
must be quashed, and the primary purpose of futures options and
forwards is to expand artificial supply to keep the price from rising.
In a wider context, the ability to print synthetic commodities out of
thin air is a means of suppressing prices generally and we must not be
distracted by claims that derivatives improve liquidity: they only
improve liquidity at lower prices.
When the dollar price of gold
found a major turning point on 17 December 2015, open interest on Comex
stood at 393,000 contacts. The year-end figure today is nearly double
that at 786,422 contracts, representing an increase of paper supply
equivalent to 1,224 tonnes. But that is not all. Not only are there
other regulated derivative exchanges with gold contracts, but also there
are unregulated over the counter markets. According to the Bank for
International Settlements from end-2015 unregulated OTC contracts
(principally London forward contracts) expanded by the equivalent of
2,450 tonnes by last June, taken at contemporary prices. And we must not
forget the unknown quantity of bank liabilities to customers’
unallocated accounts which probably involve an additional few thousand
tonnes.
In recent months, the paper suppression regime has
stepped up a gear, evidenced by Comex’s open interest rising. This is
illustrated in Figure 7.
There are two notable features in the chart. First, the rising
gold price has seen increasing paper supply, which we would expect from a
market designed to keep a lid on prices. Secondly instead of declining
with the gold price, open interest continued to rise following the price
peak in early September while the gold price declined by about $100.
This tells us that the price suppression scheme has run into trouble,
with large buyers taking the opportunity to increase their positions at
lower prices.
In the past, bullion banks have been able to put a
lid on prices by creating Comex contracts out of thin air. The recent
expansion of open interest has failed to achieve this objective, and it
is worth noting that the quantity of gold in Comex vaults eligible for
delivery and pledged is only 2% of the 2,446-tonne short position. In
London, there are only 3,052 tonnes in LBMA vaults (excluding the Bank
of England), which includes an unknown quantity of ETF and custodial
gold. Physical liquidity for the forward market in London is therefore
likely to be very small relative to forward deliveries. And of course,
the bullion banks in London and elsewhare do not have the metal to cover
their obligations to unallocated account holders, which is an
additional consideration.
Clearly, there is not the gold
available in the system to legitimise derivative paper. It now appears
that paper gold markets could be drifting into systemic difficulties
with bullion banks squeezed by a rising gold price, short positions and
unallocated accounts.
There are mechanisms to counter these
systemic risks, such as the ability to declare force majeure on Comex,
and standard unallocated account contracts which permit a bullion bank
to deliver cash equivalents to bullion obligations. But the triggering
of any such escape from physical gold obligations could exacerbate a
buying panic, driving prices even higher. It leads to the conclusion
that any rescue of the bullion market system is destined to fail.
A two-step future for the gold price
It has been evident for some time that the world of fiat currencies
has been drifting into ever greater difficulties of far greater
magnitude than can be contained by spinning a few thousand tonnes of
gold back and forth on Comex and in London. That appears to be the
lesson to be drawn from the inability of a massive increase in open
interest on Comex to contain a rising gold price.
It will take a
substantial upward shift in the gold price to appraise western financial
markets of this reality. In combination with systemic strains
increasing, a gold price of over $2,000 may do the trick. Professional
investors will have found themselves wrongfooted; underinvested in ETFs,
gold mines and regulated derivatives, in which case their gold demand
is likely to drive one or more bullion houses into considerable
difficulties. We might call this the first step in a two-step monetary
future.
The extent to which gold prices rise could be
substantial, but assuming the immediate crisis itself passes, banks
having been bailed in or out, and QE accelerated in an attempt to put a
lid on government bond yields, then the gold price might be deemed to
have risen too far, and due for a correction. But then there will be the
prospect of an accelerating loss of purchasing power for fiat
currencies as a result of the monetary inflation, and that will drive
the second step as investors realise that what they are seeing is not a
rising gold price but a fiat currency collapse.
The high levels
of government debt today in the three major jurisdictions appear to
almost guarantee this outcome. The amounts involved are so large that
today’s paper gold suppression scheme is likely to be too small in
comparison and cannot stop it happening. The effect on currency
purchasing powers will then be beyond question. Monetary authorities
will be clueless in their response, because they have all bought into a
form of economics that puts what will happen beyond their understanding.
As noted above, the path to a final crisis for fiat currencies
might have already started, with the failure by the establishment to
suppress the gold price through the creation of an extra 100,000 Comex
contracts. If not, then any success by the monetary authorities to
reassert control is likely to be temporary.
Perhaps we are
already beginning to see the fiat currency system beginning to unravel,
in which case those that insist gold is not money will find themselves
impoverished.
Posted by AGORACOM
at 5:48 PM on Thursday, January 9th, 2020
American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits.
Global gold-backed exchange-traded funds (ETFs) and similar products
had $19.2 billion or 400 tonnes of net inflows in 2019 after holdings
rebounded in December, the World Gold Council (WGC) reports. In the fourth quarter, ETF holdings reached an all-time high of 2,900 tonnes.
Overall, gold-backed assets under management (AUM) grew by 37% in
dollar terms during the year owing to positive demand and an 18.4%
increase in the gold price.
From a regional perspective, North American funds led the way with
inflows of 206 tonnes ($10.1 billion, 14.4% AUM). SPDR Gold Shares – the
world’s biggest gold ETF—and iShares Gold Trust accounted for nearly
half of last year’s inflows.
Low-cost gold-backed ETFs in the US have seen positive flows for 18
of the past 19 months and increased their collective holdings by 60%,
according to the latest WGC data.
Elsewhere, holdings in European funds increased by 188 tonnes ($8.8
billion, 13.6%), while funds listed in Asia were nearly flat, recording
an outflow of 0.1 tonnes ($12 million, 0.3%). The remaining regions had
combined inflows of 6.3 tonnes ($311 million, 16.3%).
Looking ahead, WGC analysts said that they expect investor demand to remain robust through 2020.
“The strength of gold was mainly the byproduct of a dovish shift in monetary policy. Our research indicates that a shift from a hawkish or neutral stance to a dovish one has historically led gold to outperform,†a WGC analyst said.
About American Creek
American Creek is a Canadian mineral exploration company with a strong portfolio of gold and silver properties in British Columbia. Three of those properties are located in the prolific “Golden Triangleâ€; the Treaty Creek and Electrum joint venture projects with Tudor Gold/Walter Storm as well as the 100% owned past producing Dunwell Mine.
The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King properties located in other prospective areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com
Posted by AGORACOM
at 9:35 AM on Tuesday, January 7th, 2020
American Creek has strengthened its position both financially and strategically
Treaty Creek will be advancing in a major way
Eric Sprott made two separate investments of $1,000,000 making Mr. Sprott the largest external investor in Treaty Creek
American Creek Resources Ltd. (TSXV: AMK) (OTC Pink: ACKRF)
(“American Creek”) (“the Corporation”) is pleased to report that 2019
was a pivotal year for the company which is now positioned to take full
advantage of the precious metals bull run that many experts believe we
are only in the early stages of, even though gold hit a 7 year high of
$1,580 this week. Looking back, on the first day of trading in 2019 AMK
closed at $0.03 and on the last day of trading in 2019 AMK closed at
$0.09 representing a significant annual increase. Management envisions
positive developments to continue in 2020 through the geological
advancements of its properties including the potential for a world class
resource on the Treaty Creek JV project located in the “Golden
Triangle” of Northwestern British Columbia.
Darren Blaney, CEO of
American Creek stated: “This past year was a significant turning point
for the company and will be the catalyst for more exciting developments
in 2020. The company has strengthened its position both financially and
strategically and is poised to benefit from not only a strengthening
gold and silver market but also from the investment community becoming
more aware of the company’s projects and potential. The Treaty Creek
project will be advancing in a major way and several of our other
projects including the Dunwell and Gold Hill will also be the focus of
attention this year. We very much look forward to 2020 and wish all of
our shareholders the very best this upcoming year!”
Image of the Goldstorm Zone found along the base of this hill at Treaty Creek.
The
company raised over $3.3 million in 2019 through common and
flow-through shares along with the exercise of warrants. Through these
events the company was able to strengthen existing alliances and create a
number of new highly strategic relationships bringing strength,
credibility and future increased exposure to American Creek.
Of
note, Canadian billionaire Eric Sprott made two separate investments of
$1,000,000 into American Creek as well as an additional $8,400,000
investment in our JV partner Tudor Gold for the development of the
Treaty Creek property. This makes Mr. Sprott the largest external
investor in Treaty Creek. He recently stated that he is “very excited about the opportunity there as the project has a great shot at having 20 million ounces.”
Geological Position
TREATY CREEK
The
2019 drilling at Treaty Creek was very successful and produced some of
the most significant gold intercepts in the exploration industry. The
focus has been on the gold enriched Goldstorm Zone which is on trend
with, and part of, the same geological system as Seabridge Gold’s
neighboring KSM deposits. With approximately one billion tonnes of gold
enriched rock identified (potential for a resource calculation in
2020), the Goldstorm has potential to become a world class gold deposit.
The 2019 drilling was designed to define a gold deposit with the
potential of being open pit mined. The upcoming 2020 drilling is
designed to significantly expand the deposit as the system is open to
the north, the east and at depth.
The Treaty Creek Project is a joint venture with Tudor Gold owning 3/5th and acting as project operator. American Creek and Teuton Resources each have a 1/5th
interest in the project. American Creek and Teuton are both fully
carried until such time as a Production Notice is issued, at which time
they are required to contribute their respective 20% share of
development costs. Until such time, Tudor is required to fund all
exploration and development costs while both American Creek and Teuton
have “free rides”.
DUNWELL MINE
A maiden drill program was
initiated in 2019 on the 100% owned Dunwell Mine project located in the
heart of the Golden Triangle a few kilometers outside of Stewart, BC.
This past producing high grade mine (gold, silver, lead, zinc) holds
tremendous potential and may have the best logistics found in the Golden
Triangle. Assays from the program are currently pending.
GOLD HILL AND OTHER PROJECTS
The
Gold Hill property is believed to contain the principle source lode for
Canada’s fourth largest placer deposit located downstream (Wild Horse
River Gold Rush) which produced over 48 tonnes gold (and is still
producing). Work is planned for 2020 which will advance this highly
prospective project.
American Creek also holds several other high
potential projects in other prospective areas of BC such as the
Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King.
Marketing
American
Creek will be going to great lengths in 2020 to increase the
Corporation’s exposure and recognition. Near future events including
attending many conferences including the Vancouver Resource Investment
Conference (Vancouver), AME Roundup (Vancouver), Red Cloud (Toronto),
Raise Capital (Toronto), and the Prospectors and Developers Association
of Canada (PDAC) convention (Toronto).
About American Creek
American
Creek is a Canadian mineral exploration company with a strong portfolio
of gold and silver properties in British Columbia. Three of those
properties are located in the prolific “Golden Triangle”; the Treaty
Creek and Electrum joint venture projects with Tudor Gold/Walter Storm
as well as the 100% owned past producing Dunwell Mine.
The
Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax,
Silver Side, and Glitter King properties located in other prospective
areas of the province.
For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com